Analysis on Indonesia’s growing telecommunication industry, even amidst pandemic.
In part of the government’s drive to connect the country’s broadband internet to all population, Mitratel has set a budget of USD 69.5 million or IDR 1 trillion to build more telecommunication towers for underdeveloped and outermost areas across Indonesia. Mitratel or Dayamitra Telekomunikasi is Indonesia’s largest telecommunication tower operator.
The investment director, Hendra Purnama, said the IDR 1 trillion budget has been set aside for the next four years, outside Mitratel’s annual capital expenditure. Through Bakti, a telecommunication infrastructure arm under the Communication and Information Technology Ministry, the government lends helping hand in cooperation with telecommunication companies. Under the cooperation scheme, the telecommunication companies will be responsible for operations while Bakti is responsible for constructing and maintaining the towers from the lands provided by the local government.
Positive Growth Amidst Pandemic
Indonesia’s telecommunication industry is one of Asia’s fast-developing sectors with billions of U.S dollars value in the market. As most consumers transitioned into the digitalization age, the telecommunication industry is projected to grow more and more each year.
According to Badan Pusat Statistik (BPS), this sector contributed IDR 172,39 trillion worth of GDP in the second quarter of 2021, or an increase of 6,87% compared to 2020 year-on-year (YoY). The positive growth was caused by the pandemic as schools are doing online classes and work from home regulation.
Additionally, there are 338.2 million total mobile connections and 212.4 million internet users in Indonesia. This led to the domination of mobile operators and over-the-top (OTT) applications development in Indonesia.
The country’s telecommunication infrastructure also has been growing rapidly. With the government’s support through Bakti, they are set to build 7,904 telecommunication towers for the 2021-2022 period.
Leading Telecommunications Services in Indonesia
Currently, the leading providers of telecommunication services in Indonesia are Telkomsel, Indosat, and XL Axiata. As the number of smartphone users increases, the demand for affordable data prices and greater coverage has been rising. The service providers have raced to meet the needs of their customers, such as offering data bundles, unlimited voice calls, unlimited activation periods, among other.
PT Telekomunikasi Selular (Telkomsel) is a subsidiary of PT Telekomunikasi Indonesia Tbk (Telkom) and Singapore Telecom Mobile Pte Ltd. The company provides telecommunication services and offers postpaid, prepaid, and broadband services under kartuHalo, simPATI, Loop, by.U, and Kartu as brands.
Telkomsel provides digital advertising, value-added services, entertainment, voice services, international services, bundling packages, and mail services. The company racked up USD 6 billion in revenue in 2020.
Telkomsel offers services to individuals, communities, and business corporate customers. Recently, Telkomsel launched Indonesia’s first digital internet operator under the name By.U, where their customers can get their SIM card delivered to their homes, and all payments and services were done all from our phones. It means the companies are able to adapt and see new opportunities in the ever-growing industry.
2. Indosat Ooredo
Indosat Ooredo or Indosat is a provider of telecommunication and information services. They provide cellular, fixed data, and wireless broadband services, fixed wireless and fixed phone services, fixed telecommunication and fixed voice services such as IDD, and digital services.
Indosat also offers multimedia services, fixed data, internet, and data communication services such as IPVPN, leased line, internet services, and IT services to corporations through its subsidiaries, PT Indosat Mega Media, and PT Aplikanusa Lintasarta. The company garnered USD 2.2 billion in revenue in 2021, an increase of 12.4%, and net income increased up to 1041.9% compared to 2020. Indosat serves domestic and regional corporate, wholesale customers, and domestic retail customers.
In addition, they also offer international calling, digital services, and roaming services. The company’s major brands include IM3, IMX, Starone, and Ideabox.
3. XL Axiata
XL Axiata is one of Indonesia’s leading cellular service providers, offering various types of telecommunication products and services such as voice, SMS, data, and other value-added mobile telecommunication services with an extensive network around the country. Axiata is a major player in Asia’s telecommunications industry, having stakes in mobile operators in Malaysia, Indonesia, Cambodia, Sri Lanka, Bangladesh, and Pakistan. According to Statista (2021), the company garnered 25,08 trillion Indonesian rupiahs, or equivalent to USD 1.744 billion gross revenue in 2020.
Global Telecommunication Companies in Indonesia
Currently, Indonesia has seven cellular operators, PT Hutchison 3 Indonesia (Tri), PT XL Axiata (XL), PT Indosat (Indosat), PT Sampoerna Telekomunikasi Indonesia (Ceria), PT Telekomunikasi Selular (Telkomsel), PT Smartfren dan PT. Bakrie Telecom, which all of them are local. However, there are global companies who provide their services in Indonesia, from services such as internet service providers to telecommunication manufacturers.
MyRepublic Limited is a Singaporean communications services provider that was launched in 2011. They operate in the Asia-Pacific region, with operations in Singapore, Australia and New Zealand, Brunei and Indonesia. MyRepublic is one of PT Dian Swastatika Sentosa Tbk (DSSA)’s subsidiary, providing internet services and television cable.
As of September 2020, MyRepublic was recorded to have more than 180,000 subscribers, an increase of 19% from the end of 2019. And garnered USD$ 32.55 million of revenue from the internet and cable television business.
This number increased by 6.81% compared to the same period in 2019 which was US$ 30.47 million. The amount of internet and cable television revenue is equivalent to 2.92% of DSSA’s total revenue which reached US$ 1.11 billion.
3. AT & T
AT&T has been operating in Indonesia under the Local Service Provider model since 1992. Through PT AGNS Indonesia, AT&T operationalized a Multi-Media Service Operator (MSO) license in June 2011 – and is the first foreign telecom operator to receive such a license.
According to AT&T’s latest financial reports the company’s current revenue (TTM) is USD $ 168.86 Billion. In 2020 the company made a revenue of USD $ 171.76 Billion a decrease over the years 2019 revenue that were of USD $ 181.19 Billion.
Ericsson made its first inroads into Indonesia as the first telephones in exchange for being brought from the Netherlands. The earliest telephone service became available on the islands of Java around the turn of the century.
Since then, Ericsson has played a pivotal role in shaping telecommunication in Indonesia enabling multiple generations of connectivity along with pioneering 2G, 3G, 4G in the country and supporting Indonesia’s digital vision. The 5G Business potential study for Indonesia illustrates the revenue potential of a large-scale ICT-driven transformation across industry verticals that can enable digitalization revenues of 44.2 billion by 2030, of which 39% will be 5G-enabled value. Of the total 5G enabled value, up to 47% or about 8.2 billion is addressable by operators.
Future Prospects: 5G Development
In its current state, the Indonesian mobile network is on the way to beginning 5G network technology. This would transform day-to-day digital life and business as they will have faster and greater network coverage and data speed, among others.
The ministry has targeted 5G to rollout all over Indonesia from 2024 to 2025. It takes six to seven years to connect internet networks across Indonesia.
For that, the ministry has been vigorously doing refarming frequency spectrum that will enable 5G to be more optimum. Looking to the future, Indonesia’s information and communication technology (ICT) sector has a bright outlook. There’s much potential to be uncovered, giving the country the chance to be one of the most promising ICT markets in the coming years.
Regulations and Laws
The regulations and laws of Indonesia’s telecommunications sector emphasises that they operate under state control. The Minister of Communication and Information Technology (MCIT) is responsible for administering the telecommunication laws and regulations. Foreign investment regulations also apply in the telecommunications sector. Under Law No. 25 of 2007 on Investment, foreign investment may only be undertaken via an Indonesian limited liability company established for the purpose of foreign investment (PMA company).
Enter Indonesia’s Telecommunication Industry with BRIGHT Indonesia
With the constant shift of consumer behavior and demands, it would need a lot of in-depth research about the Indonesian telecommunication industry. Therefore, to enter the Indonesian market, you would need the right local partner to assist you.
BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.
BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:
- Assist you in expanding and developing your business by identification of potential partners.
- Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arranging business meetings, and acting as a liaison.
- Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
- Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.
For more information, email firstname.lastname@example.org.
*This article is written by Nadia Syailendra